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Poll: Are you participating in PSLF?

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  • Joy Sorensen Navarre Navigate
    replied
    Love the poll! Thanks!

    The GAO Federal Student Loan Report, Aug 2015, (http://www.gao.gov/assets/680/672481.pdf) offers the big picture.

    "While the Department of the Treasury estimated that 51 percent of Direct Loan borrowers were eligible for Income-Based Repayment as of September 2012, the most recent available estimate, Education data show 13 percent were participating as of September 2014. An additional 2 percent were in Pay As You Earn."

    Additionally, "Few borrowers who may be employed in public service have had their employment and loans certified for the Public Service Loan Forgiveness program... Beginning in 2017, the program is to forgive remaining Direct Loan balances of eligible borrowers employed in public service for at least 10 years. As of September 2014, Education’s loan servicer for the program had certified employment and loans for fewer than 150,000 borrowers."

    In my experience, over the past couple of years many medical school financial aid offices ramped up their efforts to raise awareness about Public Service Loan Forgiveness and income driven repayment plans.

     

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  • DocEden
    replied
    Correct - you just need to be sure you don't consolidate them at a later date.  See question 7: https://studentaid.ed.gov/sa/sites/default/files/public-service-loan-forgiveness-common-questions.pdf

    Leave a comment:


  • mbp
    replied




    No. We have loans at different rates (i.e. M2 @ 6.55%, M3 @ 5.16%). I’d like the option of being able to kill off the higher rate loans if we came into extra money. Plus, I think the main benefit of consolidation is lower monthly payment, which really doesn’t matter when you’re on REPAYE as a resident since the monthly payment will be really low regardless.
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    I also have several Direct loans at different rates. You do not need to consolidate your loans for PSLF as long as the loans are Direct, right?

    Effectively, you're making 120 payments on each loan to have it be eligible for forgiveness.

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  • mbp
    replied
    Delete

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  • yspower
    replied
    I appreciate your time to reply! If you don't mind, one more question.

     

    One more point to confirm:

    So, your 50% subsidy amount monthly is calculated as (interest accrued amount monthly minus minimum required amount monthly) * 50%, correct? So, after the 50% subsidy, the leftover amount of interest adds up on your current unpaid interest, then.

    On fedloan website for loan details, is the amount updated daily with adding daily interest accrual? Maybe I should check it daily for few days if the website is truly up to date with quick server response to your loan payment. I heard when they withdraw monthly, it takes at least 1-2 days to process it to be updated on their website.

     

    Thanks for your big help!

    Leave a comment:


  • initforthelonghaul
    replied


    So, my plan is to just pay the monthly payment using the Direct Debit (reducing 0.25% interest rate if you sign up for this) and pay extra amount (more than the interest amount accrued after subsidy applied so this can go toward outstanding unpaid interest) using the Targeting Payment online (Fedloan servicing) to choose the specific loans I want to pay the outstanding unpaid interest (likely highest interest rate loan with most balance amount, first). So, I will wait for the Fedloan to process my monthly payment and make sure they took care of subsidy, then I will pay extra amount online targeting specific loan to attack the outstanding unpaid interest. Is my plan viable and isn’t this what you would have done the same if you were willing to pay extra? Any other recommendation?
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    Yep, this is what I would do if I were in your shoes. I would submit the extra payment the day after my monthly debit was withdrawn, since interest accrues daily.


    Did you do Direct consolidation into a single loan?
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    No. We have loans at different rates (i.e. M2 @ 6.55%, M3 @ 5.16%). I'd like the option of being able to kill off the higher rate loans if we came into extra money. Plus, I think the main benefit of consolidation is lower monthly payment, which really doesn't matter when you're on REPAYE as a resident since the monthly payment will be really low regardless.


    Why is your current unpaid interest divided by 2?
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    Sorry this is unclear - I was just trying to demonstrate how I calculated the subsidy amount. It would have been more clear for me to write this as [total interest accrued on the principal minus our monthly payments] * 50%


    Can you let us know what happens to the other half of interest amount after subsidy applies? I assume that amount will be accrued onto your outstanding unpaid interest, right? Can you confirm on your current unpaid interest amount monthly and see if subsidy is really taken care of?
    Click to expand...


    As an end user on the website, I literally never even see the full interest (before subsidy) displayed anywhere. At the top of my "View Loan Details" tab, I see:

    • Principal Balance (depressing)

    • Unpaid Interest - the amount displayed here is equal to [total interest accrued on the principal minus our monthly payments] * 50%) - I checked the math and the amount displayed here is absolutely AFTER subsidy... I can't find any number that reflected interest accrued before subsidy. Not on the website, not on my billing statements, no where.

    • Total Current Balance (Principal Balance + Unpaid Interest)




    That is why I want to pay extra amount to prevent other half amount of interest accrued after subsidy applied.
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    Sounds like you are hedging your bets, but leaning toward "more likely not to get PSLF". We are hedging as well, just leaning toward "more likely to get PSLF" (thus, trying not to make any extra payments beyond the minimum requirement).  It sure is interesting to see how different folks are approaching this!  Good luck!

    Leave a comment:


  • yspower
    replied
    Thank you for the helpful update! I have follow up questions...

    Yeah, REPAYE just started this January, 2016 so everything is new and Fedloan servicer (my lender as well) can't answer to my question clearly since they don't have a rule written under their book regarding how the extra payment will affect the subsidy. Even government might have not thought of this type of question and condition. But, at the moment, a rep told me that any extra payment should go toward outstanding unpaid interest. So, my plan is to just pay the monthly payment using the Direct Debit (reducing 0.25% interest rate if you sign up for this) and pay extra amount (more than the interest amount accrued after subsidy applied so this can go toward outstanding unpaid interest) using the Targeting Payment online (Fedloan servicing) to choose the specific loans I want to pay the outstanding unpaid interest (likely highest interest rate loan with most balance amount, first). So, I will wait for the Fedloan to process my monthly payment and make sure they took care of subsidy, then I will pay extra amount online targeting specific loan to attack the outstanding unpaid interest. Is my plan viable and isn't this what you would have done the same if you were willing to pay extra? Any other recommendation?

    Did you do Direct consolidation into a single loan? Why is your current unpaid interest divided by 2?

    Can you let us know what happens to the other half of interest amount after subsidy applies? I assume that amount will be accrued onto your outstanding unpaid interest, right? Can you confirm on your current unpaid interest amount monthly and see if subsidy is really taken care of?

    I haven't applied to REPAYE yet since I will be a soon graduate this May. But, if I have to stay with fed loan repayment, I will go for REPAYE just during my residency and try to refinance with physician salary after the training. I will still apply to PSLF annually if anyone is going to be on fed loan repayment plans. If you happen to not get a job at 503(c)1 non-profit places, you can consider refinance at that point. But, then your interest amount accrued will be capitalized when you move away from any IDRs (REPAYE/PAYE/IBR/ICR). That is why I want to pay extra amount to prevent other half amount of interest accrued after subsidy applied.

     

    Thanks!

    Leave a comment:


  • initforthelonghaul
    replied
    Oh man, I wish there was an answer to your question in writing!  I have looked everywhere for information on how the interest subsidy is applied, including reading the actual REPAYE final regulation itself (https://www.federalregister.gov/articles/2015/10/30/2015-27143/student-assistance-general-provisions-federal-family-education-loan-program-and-william-d-ford).  The impression I get is that, for now, it may have just been left to the loan servicer to determine how to apply the interest subsidy.  This seems to be consistent with what other people have said in the comments of WCI's post https://www.whitecoatinvestor.com/what-should-i-do-with-my-student-loans/ (see especially comments from user ACN and Mike).

    This is what I have seen personally for our loan servicer (FedLoan) -

    When I look online under our loan details, it lists the current unpaid interest. This number is equal to [total interest accrued on the principal minus our monthly payments] divided by 2.  So to me it looks like how FedLoan applies the 50% subsidy is monthly (as in they automatically forgive half of our remaining interest as soon as they receive our monthly payment).  There is nowhere on their website or our monthly billing statements where it officially lists interest forgiven.  If I try to make an additional payment on our loans out of the normal monthly billing cycle, I am required to pay the current unpaid interest (post subsidy) first, before I can make any dent in the principal.  If I were trying to do your strategy, I would make sure I submitted any "above and beyond" payment separately from my regular monthly payment.

    This is all obviously very unofficial, but that's pretty much par for the course with my experience with REPAYE to date. For example, when we provided proof of our income by submitting a monthly pay stub, FedLoan told me to not worry about providing documentation on one-time bonuses.  It also seems like every customer service rep tells you different information about the same question.  The ambiguities seems to work out in the borrower's favor for now, but I'd bet they will tighten things up in upcoming years.

    Leave a comment:


  • yspower
    replied
    I finally found someone who is on RePAYE...I have a dying to know question.

     

    I am a single with no kids which is different situation as yours. Current principle of 229k. Will start internship this year. Going into radiology, looking at total of 6 yrs training as well.

     

    I may likely have cash flow or be able to afford extra payment on top of minimum monthly payment they require under RePAYE. Do you have any idea how these extra payments will be taken care of? For example, does this amount go toward outstanding unpaid interest rate? I hope that by paying extra payment, government will not reduce the subsidy amount.

     

    My current understanding is this: 50% subsidy of difference in amount between the monthly accrued interest and the monthly required payment. Some people expected 50% subsidy of difference in amount between the monthly accrued interest and the actual amount you pay (minimum + any extra) which means your subsidy amount will decrease if you pay extra as long as this concept is correct.

     

    Any opinions or experience on this? In addition, does the government show how much of subsidy they took out on each bill? I assumed 50% subsidy amount will be fixed for a year until you re-certify with new income and family size.

    Leave a comment:


  • initforthelonghaul
    replied
    Spouse of a first year resident here.  He has $235k in federal loans and plans to do a 3 year residency + 3 year fellowship.  Our strategy is to hedge for now... we'd like to go for PSLF, but realize a lot could happen in the next 9.5 years.  We are currently enrolled in REPAYE and have a $135/month payment (family size = 3, single income).  When you consider the interest subsidy that REPAYE permits, we have an effective interest rate on the student loans of 3.4%.  As long as the effective interest rate is in the same ballpark as a fixed rate through DRB, etc., we will stay in REPAYE and plan to go for PSLF.  It's not really costing us anything extra right now, so we can delay the decision for a bit and see how PSLF plays out.  The only downside is that we're risking not locking in a low interest rate with a refinancer now, but that risk seems fine given the potential for PSLF.

    If you're trying to decide PSLF or refinance and you still have a decent number of years of residency left, make sure you consider your effective interest rate under REPAYE vs. refinancing!

    Leave a comment:


  • tex
    replied
    Self-pay, although my field would be a good fit for somebody with a lot of qualifying debt.

    Graduated in 2010 with somewhere around $30-35k. IIRC I did not even qualify for IBR (necessary for PSLF at the time) without a dramatic reduction in AGI. Grew up middle class and debt-averse and made decisions along the way consistent with that - public state undergrad with a full ride vs elsewhere, well-ranked state med school, lots of part time jobs along the way. If I had to do it again I would have done Roth 401k (in addition to the maxed Roth IRA) instead of throwing chunks of money at the loan, but obviously I'll turn out okay.

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  • EMscout
    replied
    I also agree with this point. The decision should be based mainly on your risk tolerance. I think there is a 70% chance that PSLF is fine for the first couple of years and then will be capped at a certain amount after public outcry or some bubble bursting. By 2020-2025 I give it 50/50 for a full mega forgiveness. People would be stuck with a lot of accrued interest if that were the case. If all goes well certainly a great loophole for MDs just too risky for me.

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  • ndayev6
    replied


    Those feelings should have nothing to do with your choice to use or not however. You should be indifferent to it, has little to do with you and wont alter your working or investment life to any noticeable degree whatsoever. Feelings and investing/finance are things that should be kept very separate as its highly likely to influence it in a negative way. You and everyone else have options available to them, no one is morally wrong to take whats legal and available, and if you dont like it we can always vote and support people that agree with us.
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    Point well taken. I agree with you. I am able to separate emotions from investing. I don't know that I will ever agree with those that accumulate significant student debt, live like they have no student debt, and then have their loans forgiven in the end. We all know people like this and I don't believe that PSLF was intended for this. Just because I don't agree with their actions does not mean that I blame them for taking the PSLF because I recognize it is legal.

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  • Zaphod
    replied




    I graduated in 2010 from medical school with 205,000 in loans despite state undergrad and state medical school. I am currently a fellow. I have paid off 50,000 and have a current balance of 155,000. I have refinanced with DRB at 3.5% fixed with 5 year payoff. I expect to pay off within 2 years of finishing fellowship.

    I would likely have qualified for PSLF but have opted to pay it off myself ASAP. I have many concerns about PSLF. My biggest issue is that I feel that the program is being abused/overused and that some individuals fail to take responsibility for their loans. This feeling is counter-balanced by my stronger feelings about the government and private loan companies preying on students. I do not think it is fair for the federal government to be charging 6.8 interest on loans for students trying to further their career opportunities. Overall, I am indifferent to those pursuing PSLF but I chose to not pursue that route.
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    Those feelings should have nothing to do with your choice to use or not however. You should be indifferent to it, has little to do with you and wont alter your working or investment life to any noticeable degree whatsoever. Feelings and investing/finance are things that should be kept very separate as its highly likely to influence it in a negative way. You and everyone else have options available to them, no one is morally wrong to take whats legal and available, and if you dont like it we can always vote and support people that agree with us.

    Leave a comment:


  • ndayev6
    replied
    I graduated in 2010 from medical school with 205,000 in loans despite state undergrad and state medical school. I am currently a fellow. I have paid off 50,000 and have a current balance of 155,000. I have refinanced with DRB at 3.5% fixed with 5 year payoff. I expect to pay off within 2 years of finishing fellowship.

    I would likely have qualified for PSLF but have opted to pay it off myself ASAP. I have many concerns about PSLF. My biggest issue is that I feel that the program is being abused/overused and that some individuals fail to take responsibility for their loans. This feeling is counter-balanced by my stronger feelings about the government and private loan companies preying on students. I do not think it is fair for the federal government to be charging 6.8 interest on loans for students trying to further their career opportunities. Overall, I am indifferent to those pursuing PSLF but I chose to not pursue that route.

    Leave a comment:

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